What triggered Korean Air nut case
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By Park Si-soo
The “nut rage” involving Korean Air’s “heiress” shows two problems with the conglomerate.
One is that Heather Cho, the national flag carrier’s former vice president, turned out to be a 40-year-old spoiled child of the chaebol.
The other is that the global transportation firm has a risk management system that can, with a dose of exaggeration, be compared to a mom-and-pop store.
Interestingly, the two issues are not as disparate as they appear. Rather, the two work as if they were cause and effect.
A nasty reputation preceded Cho, being brought up as the first child of the CEO of a family-owned chaebol, or conglomerate.
One characteristic with chaebol is the concentration of power among the so-called owner family, who tend to see those who work for them as something between employees and servants.
Of course, not all such families treat employees in the context of an owner-servant relationship.
But the latest debacle apparently has caught Korean Air in the act. The irony is that Cho holds only a 2.5 percent stake in the company.
This unfair relationship, in turn, obviously has caused the carrier to fail in the early handling of the situation, starting with its alleged attempts to cover up Cho’s misbehavior and its belated apology, both of which ended up fueling public anger.
More specifically, it would be no surprise if the carrier’s risk handlers had more than once found themselves between a rock and a hard place, not sure how to tell their “masters” the correct way of handling the situation at the risk of raising their wrath.
The situation perhaps resembles a Greek myth about King Midas with a pair of asinine ears and his barber who knows the king’s secret.
Allegations have it that the government is considering taking “Korea” out of the company’s name.
Apart from this, one of the most far-flung damages it has brought about is a financial loss to numerous shareholders.
There could be other reasons for share price movements following the Dec. 8 revelation of the nut case but Korean Air has not been doing well compared with its rival firm Asiana Airlines.
The share price of Korean Air closed at 47,500 won, Wednesday, down 950 won or 1.96 percent from the previous day, while its biggest rival Asiana closed at 6,850 won, down 170 won or 2.42 percent. The benchmark KOSPI closed at 1,900.16, down 3.97 points or 0.21 percent.
Airlines have seen a sharp increase in share prices in recent weeks amid soaring ticket demand ahead of the year-end vacation season, coupled with declining global oil prices. Considering this, Korean Air’s relatively low price can be largely blamed on the nut rage scandal, analysts said.
Experts say Korean Air should take the case as an opportunity to overhaul its corporate governance.
“Korean Air will face a similar crisis again should it leave its current governance system unchanged,” an industry insider said.
Kim Sang-jo, a business professor at Hansung University and chief of the People’s Solidarity for Economic Reform, suggested the company’s governance system be revamped by putting a professional manager with proven ability in the top seat, regardless of the size of stake they hold and, above all, personal relationship with the firm’s owner.